London: Gordon Brown yesterday mounted a strong defence of his decision to preside over the first nationalisation of a major British high street bank in a quarter of a century when he declared that the government had put the interests of taxpayers first in its handling of Northern Rock.
As the Tory leader David Cameron called on Brown to sack Alistair Darling, his chancellor (finance minister), the prime minister dismissed Tory charges that the government had created an 'economic calamity' by delaying its decision on Northern Rock.
In a joint appearance with Darling in Downing Street less than 24 hours after the government's decision to place Northern Rock into "temporary public ownership", Brown said the government would have been failing in its duty if every possible option had not been considered.This meant giving time for private sector bids to be put forward — from Virgin, Olivant and a Northern Rock management buyout — and for the government to take time in considering whether they were fair to the taxpayer.
"We will and always have put the interests of taxpayers first," the prime minister said at his monthly press conference. "The soft option would have been taking the easy road out and putting it into the new private sector bidders. The long-term question was what was the best interests of the taxpayer."Brown said both final bids — Virgin and the management buyout — failed tooffer sufficient guarantees to the taxpayer. "Given that both bids that came forward involved a subsidy from government without an appropriate level of return for taxpayers, after detailed consideration and independent advice, the chancellor concluded that the right decision is to hold Northern Rock in temporary public ownership, to be run at arms' length fromthe government under professional management until market conditions change.
"The prime minister dismissed claims that the government was to blame for the first run on a British bank since the 1860s as he blamed the worldwide credit crunch. "We are dealing with a global financial turbulence that is affecting every country, but particularly the main industrialised continents," he said.
Within hours of Brown's appearance in Downing Street, Cameron called for the chancellor to be sacked. George Osborne, the shadow chancellor, described Darling as a 'dead man walking'.Drawing a parallel with Black Wednesday in 1992, his formative political experience when as an adviser to Norman Lamont he witnessed at first hand Britain's ejection from the European exchange rate mechanism, Cameron said chancellors should resign when they presided over an 'economic calamity'.
"As soon as legislation goes through parliament the prime minister must restructure his government," the Tory leader said as he spoke of how he had learned lessons from Black Wednesday when Lamont remained in office for a year until he left the cabinet. "He needs to have a chancellor with credibility and he needs to do it quickly." The Tories, who will vote against the legislation that will nationalise Northern Rock this week, said the government should have placed it under Bank of England reconstruction, a form of public administration.Cameron said this would have halved the taxpayers' liability and would not lead, as the government claims, to a 'fire sale' of the bank.
"The Conservative party will not be supporting nationalisation. We will not back a decision that takes our country back to the dark days of the 1970s." Cameron blamed Brown's flirtation with the idea of a snap election last autumn for the delay in deciding the bank's future. "We have heard from a number of sources, from people who were advising the government, they were being told: get on with it. There is only one thing worse than a decision to sell badly or nationalise badly - the worst thing of all is to delay. I think the election probably had something to do with it."
But Darling rebuffed Tory claims of government dithering, insisting that there was no need for the taxpayer to make a big loss. He said, "At the moment the Bank of England has lent money to Northern Rock, every penny ofwhich is secured against Northern Rock's assets." He added that not one of the guarantees offered by the Bank had been called in.
He said, "Northern Rock does have a good mortgage book, and when the market conditions improve and the housing market comes back, we will be able to return the bank to the private sector, and will get the Bank of England's money back." Liberal Democrat treasury spokesman Vincent Cable, who called from the start for temporary nationalisation, called for an independent audit supervised by the Bank of England to establish the quality of Northern Rock's assets and loan book. Pledging his party's support for the legislation, Cable said job losses were inevitable, but added, "At least the bank and the north-east have some long-term hope." - The Guardian
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